Short Term Impact of Option Trading on Underlying Securities

Whiteside, Mary M.; Dukes, William P.; Dunne, Patrick

doi:10.1111/j.1475-6803.1983.tb00341.x

Cited by 41 publications

(20 citation statements)

References 1 publication

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“…Evidence that beta remains unchanged is also reported by Trennepohl and Dukes (1979) and Whiteside, Dukes and Dunne (1983), who used daily data to calculate returns. However, Whiteside et al go on to point out that when their results are evaluated on a year by year basis, there is a tendency for postlisting betas to become progressively smaller relative to their pre-listing counterparts.…”

Section: Previous Studiesmentioning

confidence: 50%

Options Listing, Market Liquidity and Stock Behaviour: Some Canadian Evidence

Chamberlain

Cheung

Kwan

1993

Business Fin & Account

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This study examines the price behaviour, trading volume and liquidity of stocks in the Canadian market at the time of options listing. Unlike some studies examining similar effects in the United States, the present one finds no evidence to indicate that either daily return volatility or trading volume is affected by the listing. Similarly, liquidity, as measured by the bid‐ask spread, is unaffected. At the same time, cross‐sectional tests indicate an inverse relationship between before‐to‐after trading volume and the before‐to‐after bid‐ask spread.

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Section: Previous Studiesmentioning

confidence: 50%

Options Listing, Market Liquidity and Stock Behaviour: Some Canadian Evidence

Chamberlain

Cheung

Kwan

1993

Business Fin & Account

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“…Ho & Liu (1995) extend the analysis by examining the volatility of the volume, but find no significant changes. In contrast to Ho & Liu (1995), an earlier study by Whiteside, Dukes & Dunne (1983) found a significant increase in the volatility of volume. Whiteside et al (1983) results must be tempered by the older time period (1973)(1974)(1975)(1976)(1977)(1978)(1979), which may not be reflective of contemporary impacts, as evidence by changing impacts on price.…”

Section: Literature Reviewcontrasting

confidence: 39%

“…Later research by DeTemple & Jorian (1990) and St Pierre (1998) support Conrad's (1989) findings of decreased volatility and unchanged beta, while Haddad & Vorrheis (1991) find decreased volatility at the same time as significantly decreased beta. In an earlier paper, Whiteside, Dukes & Dunne (1983), find that, in the short-term, variance decreased subsequent to option introduction. Skinner (1989) uses a before/after ratio to determine the change in variance, and also concludes that variance has fallen.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Warrant Introduction: The Australian Experience

Clarke

Gannon

Vinning

2011

Rev. Pac. Basin Finan. Mark. Pol.

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The impact that derivative trading has on the underlying security is essential to our understanding of security market behaviour, and important in the fields of market efficiency and pricing of such derivatives. This paper examines the impact that the introduction of exchange traded derivative warrants has on the underlying securities' price, volume and volatility in the AbstractThe impact that derivative trading has on the underlying security is essential to our understanding of security market behaviour, and important in the fields of market efficiency and pricing of such derivatives. This paper examines the impact that the introduction of exchange traded derivative warrants has on the underlying securities' price, volume and volatility in the Australian market. The major findings of significant negative abnormal returns, reduction in skewness, no change in beta and small changes in variance are consistent with recent research findings in the US, UK and Hong Kong. However findings of derivative warrant listing resulting in decreased trading volume in contrast with most prior research in the field.

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“…prediction error) using the conventional single factor capital asset pricing model (CAPM). This is an approach to total risk decomposition commonly used in the option listing literature (Bowe & Mazouz, 2004;Chaudhury & Elfakhani, 1995;Damodaran & Lim, 1991;Draper, Yadav, & Watt, 1992;Sahlströ m, 2001;Skinner, 1989;Whiteside, Dukes, & Dunne, 1983). 7 Second, in contrast to other studies in the derivatives listing literature, we also employ the Fama and French (1992) three-factor model (TFM) to distinguish between systematic and diversifiable risk.…”

Section: Introductionmentioning

confidence: 99%